Yesterday afternoon, after 48 hours of political theater, the Bush administration and congressional leaders finally agreed on the $700 billion rescue plan, which they touted as a “Wall Street bailout to save Main Street.”
This, despite ideological carping by a few nutjob Republicans who, after leading the charge to double the national debt to over $10 trillion in recent years, are now posturing as born-again fiscal conservatives determined to spare the American people more wasteful government spending.
The legislation includes the four guiding principles Barack Obama championed, namely: 1) a ban on generous payouts for irresponsible CEOs on Wall Street; 2) replacing Treasury Secretary Hank Paulson’s absolute authority over the bailout’s execution with a bipartisan independent board; 3) an investor stake for taxpayers; and 4) assistance for people who are in danger of foreclosure.
According to the Wall Street Journal, the legislation, “at its core”, provides the means for the Treasury Department to:
[buy] impaired mortgage-related assets from financial firms — giving them cash to replace the toxic debts that have put them in danger or dissuaded them from lending. The plan is to help the firms restore their capital bases as well as the trust that enables them to borrow and lend at reasonable terms. Without this, officials worry that the credit markets, the lifeblood of the economy, would grind to a halt.
Meanwhile, there has been virtually no reporting on the $25 billion in loan guarantees for the financially strapped auto industry, which the government approved on Saturday.
Moreover, nobody knows whether these bailouts will prevent the economic meltdown everybody has been warning about. But they do answer the following question I posed in a recent commentary on this unfolding crisis:
What will happen when another corporation “too big to fail” (like GM or GE) looks to the government for taxpayer dollars to pay for their corporate losses?
[Chickens come home to roost on Wall Street…, The iPINIONS Journal, September 16, 2008]
And they confirm the cynical conclusion I drew in this commentary about the very visible hand of government reaching out to rescue so many erstwhile private companies; namely that:
If nothing else, this latest bailout should finally destroy the myth that the US is running a capitalist, free-market economy. After all, this (and the other government bailouts cited above, which effectively privatized shareholder gains and nationalized losses), coupled with longstanding corporate subsidies, is indistinguishable from the way China runs its socialist, centrally planned economy.
Related Articles:
Chickens come home to roost on Wall Street…
McCain and Obama debate…amidst economic crisis
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